• PF loans

  • As of end-September 2008, financial institutions as a whole have provided a total of 81.6 trillion won in PF loans, but the delinquency ratio is at a moderate level of 4.6 percent.

    Meanwhile, the coverage ratio stands at 104.5 percent and PF loans only account for 3.1 percent of the financial industry's total assets. Therefore, it is fair to judge that financial institutions hold little risk of losses.

    In the case of savings bank PF loans, which have served as potential risk factors, the share of PF loans (23.4% in end-Sep. 2008 20.9% in end-Dec. 2008) and the delinquency ratio (16.9% in end-Sep. 2008 13.0% in end-Dec. 2008) have fallen dramatically thanks to the government's restructuring efforts.

    < Financial Sector PF Loan Status >

    Unit: %

    Amount of PF loans PF loan delinquency Ratio Coverage ratio PF loans/total loans
    Banks Savings Banks Total Banks Savings Banks Total Banks Savings Banks Total Banks Savings Banks
    End-Dec. 2007 41.8 12.1 70.5 0.48 11.6 2.9 222.8 106.8 138.8 4.1 25.6
    End-June 2008 47.9 12.2 78.9 0.68 14.3 3.6 188.6 90.6 113.4 4.4 24.1
    End-Sep. 2008 49.7 12.6 81.6 1.27 16.9 4.6 137.2 89.7 104.5 4.3 23.4

    6Coverage Ratio: Accumulated loan loss provision NPL

    7The outstanding balance of PF loans have decreased as a result of sale of potentially non-performing PF loans to Korea Asset Management Corporation (KAMCO) (502.3 billion won) and exercise of security rights (101.1 billion won between Sep.~Dec. 2008).

    The banking sector is also sustaining soundness with falling delinquency ratio from 1.27 percent at end-September 2008 to 1.07 percent at end-December 2008.8

    In addition to reducing credit risk of PF loan-related construction companies through the main creditor-led corporate restructuring scheme, the government is preparing a comprehensive response based on the result of the fact finding on the real estate-related PF loans in the entire financial sector (Jan. 2008).

    8The outstanding balance of loans has risen slightly in the process of undertaking previously-approved projects.

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